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March 17, 2015
Shareowners Continue Push for Fracking Disclosure
    by Robert Kropp

Six companies are recipients of resolutions this proxy season, calling for greater disclosure of environmental and community risks associated with hydraulic fracturing.

Thanks to the unrelenting efforts of sustainable shareowners and others to bring transparency and safety to the practice of hydraulic fracturing, I've been following developments related to fracking for several years. But I still remember my first response. Breaking open the rock under the earth's surface with millions of gallons of water and often toxic chemicals, to extract oil and gas? That can't be good.

Indeed, r esearch published earlier this year in the Bulletin of the Seismological Society of America (BSSA) confirmed that hydraulic fracturing in Ohio “activated a previously unknown fault” and caused “a series of five recorded earthquakes, ranging from magnitude 2.1 to 3.0.”

The third edition of Disclosing the Facts, published late last year by a coalition of sustainable investment organizations, notes increased concern over the potential for seismic events, stating, “States have begun to meet with seismology experts from industry and academia on best methods to address seismicity risks from fracturing and from disposal of fracturing wastes.”

Even before the first edition of Disclosing the Facts was published in 2011, the organizations—the Investor Environmental Health Network (IEHN), As You Sow, Green Century Capital Management, and Boston Common Asset Management—have engaged with oil and gas companies in an effort to have them responsibly address the environmental and community risks associated with fracking. As the latest edition reveals, corporations are largely failing to disclose management practices and key performance indicators.

“The results of this year’s scorecard demonstrate a widespread industry trend of underperformance in disclosing key performance metrics,” the report states. “Across the board, companies are failing to provide investors and the public with sufficient quantitative information to understand and compare the risks and opportunities presented by these companies’ shale play operations.”

In response to the persistent underperformance, shareowners have returned this proxy season with resolutions filed at six companies: Chevron, ExxonMobil, WPX Energy, QEP Resources, SM Energy, and Chesapeake Energy. Five of the six companies received failing grades in the report; SM Energy was not scored.

In addition to the authors of the report, the investor coalition includes Mercy Investment Services, Calvert Investments, and the Sisters of St. Francis of Philadelphia. “Five of the six resolutions press the companies to set goals and to provide quantitative reporting on progress towards reducing the impacts of their fracking operations on ground and surface water, air quality, and local communities,” the investors state. “The shareholder proposal at Chesapeake Energy Corporation encourages the company’s board to consider environmental experts for future openings on the board of directors, citing the company’s history of sizeable civil and criminal penalties for infractions linked to its fracking operations.”

The work on the issue by sustainable investors would be eased to a great extent by federal regulation, but no such regimen exists at present. In response, some states have addressed the risks of fracking on their own. New York and other states has banned it outright, and California now has a law requiring disclosure of all chemicals used in the practice. According to a recent report, “Laboratory analyses showed extremely high concentrations of contaminants....Many of the chemicals, heavy metals and radiation levels exceeded the state’s standards for drinking water.”

The chemicals used in fracking, according to the disclosures, include neurotoxins and known carcinogens.


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